The retail slump comes as the political parties fire their opening salvoes in the general election campaign.
Photograph: Fabio De Paola

The strong recovery on Britain’s high streets after last year’s Brexit vote appears to be over, with retail sales figures for the first quarter showing the biggest drop in purchases in the last seven years.

UK retail sales fall again as rising living costs bite

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Evidence of a steep decline in recent months was emphasised by the month-on-month figure, which has fallen for four out of the last five months and declined by 1.8% in March (or by 1.5% when fuel sales were excluded).

A dry spell for the housing market – which has had almost a year of lacklustre sales, according to surveyors’ body Rics – was blamed for a steep fall in sales of household goods and furniture.

The slump comes as the political parties fire their opening salvoes in the general election campaign. Theresa May has indicated she will focus on her ability to deliver the benefits of Brexit, in part from the lower value of the pound.

Analysts said consumers were less willing to spend now the impact of weaker sterling was translating into higher shop prices. The pound is 14% lower against the dollar than it was on the day of the referendum in June when the UK voted to leave the European Union.

Weaker sterling makes goods imported from abroad more expensive, which is a big blow to the retail sector when Britain imports most of its food and runs a large deficit in goods with the rest of he world.

Kate Davies, senior statistician at the ONS, said prices were rising across the board. Average shop prices (including fuel) increased by 3.3% in the year to March, which was the sharpest rate of growth since March 2012.

The biggest contribution came from petrol stations, where average prices rose by 16.4% year-on-year.

Labour MP Chuka Umunna, who is a leading supporter of the lobby group Open Britain, said: “The Brexit vote has already plunged the pound to its lowest value in 30 years, putting up prices in the shops. And leaving the single market and customs union will make prices higher still, as imported food, fuel and clothes face new barriers to trade.”

Andrew Sentance, a senior economic adviser at PwC, said a nine-month recovery on the high street had hit the buffers.

“These latest retail sales figures show that the post-Brexit surge in consumer spending has come to an abrupt end,” he said. “It is not surprising to see consumers reining in their spending. Inflation has caught up with pay growth, so real incomes of workers are no longer rising. Employment growth has also slowed sharply over the past six months, even though unemployment remains historically low.”

Simon Wells, chief European economist at HSBC, said the unexpectedly sharp contraction in March showed “consumers are feeling the pinch”, while Victoria Clarke, UK economist at Investec, said it would drag first-quarter GDP growth down to 0.4%, from 0.7% in the last three months of 2016.

But Ruth Gregory, UK economist at Capital Economics, was more upbeat and said the figures most likely overstated the weakness in overall household spending growth that was typical in the first quarters.

“Retail sales only account for about a third of household spending, and the recent evidence on other areas of spending has been more encouraging. For example, the Bank of England’s agents’ score of consumer services turnover has held steady at a fairly high level,” she said.

The ONS found that shoppers bought fewer goods “across all retail sectors except textile, clothing and footwear stores where sales volume increased by 1.9%”. It said the largest decreases were among stores selling household goods and fuel – at 3.3% and 3.1% respectively. These were offset to some extent by internet sales, it added.

“Anecdotal evidence from textile, clothing and footwear retailers suggests that increases in internet sales have contributed to growth. When comparing March 2017 with March 2016, internet sales in textile, clothing and footwear stores have increased by 28.1% – the largest year-on-year increase since August 2014,” it said.

• This article was amended on 24 April 2017. Retail sales have fallen in four out of the past five months, not for the last five consecutive months, as stated in an earlier version.